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The Sinocism China Newsletter 07.02.15

"Sinocism is the Presidential Daily Brief for China hands"- Evan Osnos, New Yorker Correspondent and National Book Award Winner

As I warned in the last newsletter our impending move to DC is making publishing very sporadic. Thanks for your patience.

Today’s Links:

THE ESSENTIAL EIGHT

1.Shanghai Composite Tumbles Below 4,000 as State Support Fails – Bloomberg The drop below 4,000 is a blow to investors who had speculated authorities would intervene to support shares, a strategy employed near closely watched levels in the past. While China’s securities regulator eased margin-trading rules and the nation’s exchanges announced fee cuts overnight, the moves failed to revive confidence in a market that has wiped out the equivalent of France’s entire equity capitalization in three weeks // ugly, very risky if this does not stabilize soon…not just mom and pops have lost a lot in the last two weeks, plenty of “elites” getting hammered too….

Related:Gov’t Once Again Tries to Pull Stock Market out of Nosedive-Caixin “Speaking of the damage we saw over the past half a month wrecked by the sell-offs of leveraged investors, we are seeing only the tip of an iceberg,” Xu Gao, chief economist at Everbright Securities, wrote in a commentary published on Caixin’s Chinese website. He says the most urgent task the regulator faces is to break the cycle of lower prices and forced sales to avoid triggering an avalanche of sell-offs, which he suggests may happen if the Shanghai Composite Index falls to about 3,400 points. A plunge could cause banks to suffer because they have lent indirectly to stock investors, he said. “The consequences will be grave enough to be called a financial crisis.”

Related:Trader Fights the Market Tide in Shanghai – WSJ The 36-year-old said he has gone through wild market swings before—he became interested in stocks as a teenager—and it doesn’t break his nerve at all. But a lot of his clients are new to the market, he explained, and need comforting at times like these. He took a few calls from nervous investors after Wednesday’s drop. “Confidence comes from within, and if you still have money you still have confidence,” he said, as his put his bulky black laptop and cables into his backpack to catch a train to Hangzhou for more marketing. “The bull market will come back eventually, and money may fall from the sky.”

2.Jitters in Tech World Over New Chinese Security Law – The New York Times New language in the rules calls for a “national security review” of the technology industry — including network and other products and services — and foreign investment. The law also calls for technology that supports key sectors to be “secure and controllable,” a catchphrase that multinationals and industry groups say could be used to force companies to build so-called back doors — which allow third-party access to systems — provide encryption keys or even hand over source code. As with many Chinese laws, the language is vague enough to make it unclear how the law will be enforced, but it suggests a new front in the wider clash between China and the United States over online security and technology policy.// and may effectively kill the Bilateral Investment Treaty under negotiation with the US?

3.Xi demands improved regulations, forceful implementation in anticorruption drive – Xinhua Chinese President Xi Jinping said efforts to weed out undesirable work styles and corruption should rely on improved law and regulations and forceful implementation of such rules. Xi, also general secretary of the Communist Party of China (CPC) Central Committee, made the remarks at a study session attended by members of the Political Bureau of the CPC Central Committee on Friday. As the CPC prepares to celebrate the 94th anniversary of its founding next Wednesday, top leaders gathered to discuss how the Party can rid itself of corruption. At the study session, Xi called for efforts to intensify and improve the construction, management and supervision of the Party and said that weeding out undesirable work styles and corruption fundamentally relies on law and regulations, which must be at the heart of the drive. // Saturday CCTV Evening News on this 习近平在中共中央政治局第二十四次集体学习时强调 加强反腐倡廉法规制度建设 让法规制度的力量充分释放 Zhang Gaoli, travelling overseas, missed the Politburo meeting and study session

Related: Top leadership studies anticorruption ahead of CPC anniversary – Xinhua Xi stressed the importance of the Party’s fight against corruption in carrying out the “Four Comprehensives,” a strategic layout for national renewal. He said that though previous efforts had succeeded in refreshing the Party and government, and renewing the faith of Party members and the public, problems remain and the CPC still faces an uphill battle against corruption. “There can be no rest or turning back in our anticorruption drive,” Xi said. To improve the anticorruption system, current rules and regulations must be revised and new ones drafted, said Xi. On the same day, the CPC issued a new regulation on the performance of officials, promising that ineptitude could result in demotion or dismissal. It also revised a regulation on discipline inspection, the first change since the rule came into force in 2009.

Related:China’s Anti-Corruption Campaign Enters Phase Two | The Diplomat On June 26, at the Politiburo collective study session, Chinese President Xi Jinping stressed the importance of laws and regulations in the anti-corruption campaign. According to Xi’s speech, though China has made great achievements in anti-corruption campaign since the 18th Party congress, the overall situation is still serious. Xi stressed that anti-corruption campaign will not stop despite some skeptical views in Chinese society. What is most important now is the building of institutions, which includes the attendant laws and regulations. Xi also emphasized that the Party will not allow the so-called “broken window” effect to occur. From this study session, the message is clear enough: the first stage of anti-corruption campaign is largely over-chen Dingding

4.Share Price Tumble Puts Tycoon Linked to Fallen Officials, Businessmen in Spotlight-Caixin According to people with knowledge of the matter and transaction documents, Che profited handsomely from a deal in 2002 in which he purchased stakes in Ping An Insurance and Haitong Securities through a Tianjin businessman named Liu Zhiyuan. The two companies’ listings brought Che net profits of 6 billion yuan and 2 billion yuan. The deals prompted speculation that Che used his family connections to profit. Che is the son-in-law of a former central bank governor. A source close to the matter said after Che was detained that Liu had also become the subject of a probe. Several sources said the inquiry into Che was triggered by an investigation into Ma Jian, a former vice minister of state security, and Guo Wengui, a property tycoon who controls Beijing Pangu Investment Co. and was a stakeholder in Digital Domain. Ma was detained in January by the Communist Party’s graft buster. Guo is overseas. // sounds like this case is about much more than Ma, Guo, Che Feng and Dai Xianglong

5.China nurtures better environmental supervision – Xinhua Chinese President Xi Jinping presided over the 14th meeting of the Leading Group for Overall Reform on Wednesday afternoon, which he also heads. Several topics were discussed at the meeting, including an environmental protection supervision plan for a better monitoring network, a plan for independent auditing of officials and a plan to hold officials responsible for damage their decisions cause to the environment. Xi urged officials to implement the “three stricts and three honests”, a series of requirements for officials to improve their life and work raised by President in March last year. The slogan refers to: “be strict in morals, power and disciplining oneself; be honest in decisions, business and behavior.”

Related:China Says Retired Officials Can Be Punished For Pollution Under new guidelines on environmental monitoring, it is officials in senior positions who will be held accountable for whether or not the environment is being protected, state television said on its main evening news. “For officials in leadership positions who are responsible for environmental damage, it does not matter whether they have been reassigned, promoted or retired, they will be held seriously accountable,” state television said in its summary of the rules. Protecting the environment was a key part of a move toward a more sustainable economic model, it added.

6.Report claims victory for information controls in China – China Media Project In the simplest sense, the past decade of media policy and propaganda practice in China has been all about the Chinese Communist Party regaining control of public opinion, increasing its capacity to “guide” the agenda against the backdrop of social and technological change. The recently released report on mobile public opinion suggests that — at least for now — the Party might be winning the battle for dominance over information and public opinion, thanks to tighter controls on commercial media and the internet. As Yan Hongshuang (阎虹爽), at People’s Daily Online, summarises the report: “According to the analysis, since 2014 there has been strengthened integration of the mainstream public opinion sphere and the popular public opinion sphere, and both the degree of consensus in online public opinion and the level of approval of the government rose rapidly, so that [China’s] online public opinion ecology got on the right track.”

7.The Pentagon’s Fight Over Fighting China – POLITICO Magazine “Listen, AirSea Battle is about China, and there’s no doubt about that. But it’s also about a lot more,” Princeton’s Aaron Friedberg says. “Just because we’re thinking about ASB, about ways to protect ourselves, doesn’t mean we think we’re going to have a war with China. Our military talks to their military all the time. But our military has to prepare for every option—which is precisely what we should be doing. We have exaggerated concerns about offending the Chinese, but I think at some point we have to be more candid.” Army senior officers remain convinced that ASB is aimed at them more than at China. Recently, a retired Army colonel and consultant to the Joint Chiefs of Staff spoke with a roomful of young Army officers. “I asked them, ‘How many of you think that AirSea Battle is just an attempt by the Navy and Air Force to grab a greater share of the defense budget?’ Every hand in the room went up, every single one,” he told me. “It’s an article of faith.”

8.China Economic Update – June 2015 – World Bank China’s growth will keep moderating as the transition to more sustainable growth consolidates Balancing reforms and short-term demand management remains a priority in 2015 The transition to the “new normal” requires a better allocation of credit and indigenous capacity for innovation

BUSINESS, ECONOMY AND TRADE

NDRC deputy Liu He wins China’s top economic science prize｜WantChinaTimes Chinese economist and politician Liu He has been awarded China’s highest prize in economic science, the Sun Yefang award, in memory of the distinguished Chinese reformist economist, reports the Shanghai-based China Business News. // the last issue of the newsletter mistakenly called it the Sun Zhifang Prize

POLITICS AND LAW

Provinces Continue to Separate Leadership of Police, Law Committees-Caixin The situation began to change in 2010, when the party’s Organization Department, which handles personnel matters, told leaders of the country’s provinces to see that the two jobs were held by different people. This was being done so that prosecutors and the courts had a better chance of holding fair trials, the department said. After the change in Hunan, 28 of the mainland’s 31 provinces, autonomous regions and municipalities have different people heading their law committees and police forces. The others – Ningxia, Guangxi and Jilin – are undergoing leadership reshuffles and are very likely to follow suit, analysts say.

Former top Chinese spy in Tibet investigated for alleged corruption | South China Morning Post A former top Chinese spy in Tibet is under investigation for suspected graft, the ruling Communist Party’s anti-graft watchdog said on Friday, in a rare example of corruption busters going into the restive and remote region. Le Dake, 55, was the first regional-level leader to be detained in Tibet for alleged corruption in the nationwide crackdown on graft, state media reported. Reports described him as Tibet’s “first tiger”

司法部回应令计划案调查进展：没有新的信息新闻腾讯网a vice Minister of Justice says in response to a question at a press conference that there are no updates in the Ling Jihua case

State Grid Said to Have Unapproved 7 Bln Yuan Property Project-Caixin State Grid acquired the plot in 2012, the report said, telling land authorities that it was for a modernized grid project when in fact it developed a commercial property there. The electricity transmission firm budgeted 7 billion yuan for the complex, which includes serviced apartments, office buildings, shopping malls and conference halls with a total floor space of 510,000 square meters in the Chaoyang District. Some 1.29 billion yuan had been spent on the project as of February last year, the audit report said, and was being co-developed by State Grid’s north China division and a wholly owned subsidiary called Luneng Group.

China’s Communist Party: Still Big, and Getting Bigger – China Real Time Report – WSJ In a communique released Tuesday, the Organization Department of the Communist Party’s Central Committee said that the party boasted 87.793 million members as of the end of 2014. The figure – which exceeds the entire population of Germany – represents a net increase of 1.1 million from a year earlier…The membership of the Chinese Communist Party currently stands at about 7.8% of China’s adult population. // what is fair estimate of the dependents per member? lots of people obviously have a vested interested in the Party…

Xi stresses CPC governance at county level – Xinhuathe tiger flies on the front lines // President Xi Jinping has called on secretaries of Communist Party of China (CPC) committees at county level to be loyal to the Party, take initiative in economic development and serve the people wholeheartedly. Xi made the remarks on Tuesday when meeting with 102 individuals selected from more than 2,800 county-level Party secretaries across the country for their outstanding work… “When counties are governed, the world is at peace,” Xi said, quoting an ancient Chinese saying

Xi Jinping aims crosshairs at Moutai private members’ club｜WCTDuowei, so take with a big grain of salt… // The reason Beijing and Zhejiang took the brunt of the campaign against private members’ clubs is reportedly due to a speech made by Xi at the third plenary session of the CCDI on Jan. 14, 2014, in which he explicitly named several private member clubs, according to a Hong Kong media report. The Moutai club was established in 2009 by Moutai Group honorary chairman Ji Keliang, the group’s chairman Yuan Renguo and group board member Li Botan under the auspices of the Beijing Moutai Culture Research Association and its membership is said to include many cultural and business leaders. The former chairman of CITIC Group, Kong Dan is the head of the club and Alibaba Group founder and chairman Jack Ma was the club’s inaugural vice director of the board.

FOREIGN AND DEFENSE AFFAIRS

See China’s rapid island-building strategy in action – The Washington Post AMTI Director Mira Rapp-Hooper says the facilities have “all the trappings” of military capabilities and applications and would improve China’s ability to monitor other nations’ activities in the disputed Spratly Islands. The construction work, she says, “is going to be the new diplomatic challenge, not just for the United States, but also for all the regional countries which have been very keen to deter China from militarizing the islands.”

U.S. compares China’s South China Sea moves to Russia’s in Ukraine The U.S. State Department’s number two diplomat on Friday compared China’s behavior in pursuit of territory in the South China Sea to that of Russia in eastern Ukraine. Deputy Secretary of State Antony Blinken called China’s large scale reclamation projects in the South China Sea, “a threat to peace and stability.”..Blinken said in a speech at the Center for a New American Security think tank.

When Vietnam and China Bicker, Traders on the Border Feel the Bluster – The New York Times In one apparent sign of Vietnamese-Chinese tensions, the general secretary of Vietnam’s ruling Communist Party, Nguyen Phu Trong, who is widely viewed as more friendly toward China than toward the United States, may visit Washington as early as this summer, the first such visit by any Vietnamese party secretary. The party’s senior leadership has long been divided over how close Vietnam should be to China or the United States. But a Vietnamese academic in Hanoi with close ties to the government, who requested anonymity to discuss a politically sensitive matter, said Mr. Trong’s planned trip reflected a growing consensus inside the party that a stronger relationship with the United States was in Vietnam’s national interest.

Latin American Herald Tribune – NETmundial Initiative Charts Path to Better Web Governance at Brazil Meeting During the closed-door meeting, held on Tuesday, the NETmundial Initiative established the basic pillars of its letter of intent, which aims to provide a reference for governments, the private sector and civil society organizations in addressing Internet governance challenges…The meeting participants included China’s cyberspace administration minister, Lu Wei; a member of the managing board of the World Economic Forum, Richard Samans; and the CEO of the Internet Corporation for Assigned Names and Numbers, Fadi Chehade…The council also elected five co-chairs, including Chehade and the founder and executive chairman of Chinese e-commerce giant Alibaba, Jack Ma.

Group of 173 Uyghurs Freed From Thai Detention Arrive in Turkey A group of 173 ethnic Uyghur women and children have arrived in Turkey for resettlement after being detained for more than a year by Thai immigration authorities for illegally entering the country while fleeing persecution in northwestern China’s restive Xinjiang region, sources said Wednesday. Seyit Tumturk, vice president of the Munich-based World Uyghur Congress, told RFA’s Uyghur Service that the group had arrived at the airport in the commercial capital Istanbul early on Tuesday.

China upset with Turkey’s concern on Ramadan restrictions Some local governments in China’s far western region of Xinjiang have stepped up controls on the Islamic faith followed by the Turkic Uighur people ahead of and during Ramadan, including restrictions on fasting. Turkey’s foreign ministry said it had been “saddened” by these reports and passed its concern on to the Chinese ambassador in Ankara. Chinese Foreign Ministry Spokeswoman Hua Chunying said China wanted to have a good relationship with Turkey. “China has already demanded that Turkey clarify these reports and we have expressed concern about the statement from the Turkish foreign ministry,” Hua told a daily news briefing.

HONG KONG, MACAO AND TAIWAN

Viral in China: A Bittersweet Farewell to Hong Kong | Foreign Policy Hong Kong’s declining influence is water-cooler conversation in mainland China once more. On June 20, an article from Chinese online investment publication Gelong Hui titled “Hong Kong, Don’t Forget Me” appeared on the popular chat platform WeChat — it promptly received over 100,000 views, and was widely shared and discussed elsewhere. The post, by an anonymous mainland citizen who spent years working in the Chinese territory of Hong Kong and now works in finance in the nearby Chinese megacity of Shenzhen, reads as a melancholy goodbye to the former, although it also takes some digs at Hong Kongers, particularly those in the middle and lower classes. // is Hong Kong a long-term short?

China’s Gamers Aren’t Buying Many Consoles – Bloomberg Business One major issue is that Chinese gamers tend to play on personal computers or mobile devices rather than through a machine hooked up to a television. About 9 million people in China will play games on their TVs this year, according to Lisa Hanson of Niko Partners.

Xiaomi sets up internal Communist Party organisation – Hong Kong Free Press Party mouthpiece Global Times published a commentary on Monday backing Xiaomi’s decision, saying the practice is commonplace in China and that being a party member usually adds to a job seeker’s chances of getting hired. According to Sina News, internet companies including Alibaba, Tencent, Baidu, Sohu and Sina have all set up party committees.

Xiaomi Sold 34.7M Smartphones In First Half Of 2015, Up 33% Year-On-Year | TechCrunch CEO and co-founder Lei Jun previously estimated that the company would sell 100 million smartphones this year. While 34.7 million in the first half of 2015 is impressive — Xiaomi said it represents a 33 percent increase on the first half of 2014 — the company is going to need to kick up its sales if it is to hit Lei Jun’s lofty target for 2015.

Chipmaker Intel on a China Partnership Drive-Caixin Intel is trying to catch up with the competition after losing ground in recent years in the mobile Internet business, which has been dominated by chips developed by Qualcomm, MediaTek and others. By teaming up with small Chinese companies, Intel has started building a vertically integrated business chain to manufacture mobile devices based on its chips in Shenzhen. It is a strategy that has been music to the ears of more than a dozen companies that got started by churning out simple, cheap products but are now standing tall as members of Intel’s global team.

China taps into university students in developing positive Internet culture – Xinhua | China’s Internet regulator has launched the country’s first online culture festival for universities as it pushes students to take part in developing a positive Internet culture, said the Cyberspace Administration of China (CAC) on Thursday. Jointly sponsored by CAC and the Ministry of Education, the festival will feature a series of activities on online culture products competitions and exhibitions, including micro film, photography, cartoon and Internet innovation.

China’s Desire for Chip Independence Fueled ISSI Bidding War – Bloomberg Business ISSI’s shareholders on Monday approved the China-backed fund’s $731 million offer, ending more than a month of opposing bids. San Jose, California-based Cypress said last week that its best and final proposal was $22.60 a share, shy of Uphill’s $23-a-share offer. The deal, which remains subject to U.S. regulatory approval, is the latest example of China’s desire to shed its reliance on overseas technology.

SOCIETY, ART, SPORTS, CULTURE AND HISTORY

How Media Investors Hope to Play Ball in Growing Sports Industry-Caixin In October last year, the State Council announced plans to have the sports industry contribute 5 trillion yuan to GDP by 2025. The cabinet also said it will eliminate barriers that hinder the industry’s rapid development and encourage private capital to invest in building facilities, and providing related products and services.

After SCOTUS Ruling, China’s Twitter Is Trending Rainbows Too | Foreign Policy Support for the ruling extended to diverse segments of Chinese society. One self-styled fan club of Chinese President Xi Jinping called the “Learn from Xi Fan Group,” with more than 2.7 million followers on its Weibo account, held an informal poll one hour after the Supreme Court ruling was announced, asking Weibo users to state whether they supported or opposed same-sex unions. Within hours, the post garnered more than 4,300 responses; the most popular comments were near unanimous in their enthusiastic support for equal marriage rights.

This Is What It’s Like to Come Out in China | VICE | United States China’s issue with gays goes like this: sleeping with a guy makes it impossible to have offspring. The guy part isn’t necessarily bad, but the no offspring is 不孝, not filial. There is a line central to Confucianism engraved on the hearts of most Chinese people, either consciously or socially coded: “不孝有三，无后为大.” It means, “There are three main ways of being unfilial, the worst of which is not providing descendants.”

Razing History-Caixin A village in Shanghai listed as a cultural heritage site is being demolished so a school can be built

Ai Weiwei breaks auction record with bronze animal heads | Chinese art Circle of Animals/Zodiac Heads, which depicts the signs of the ancient Chinese zodiac, fetched 3.4 million pounds on Monday June 29, within its presale estimate of 3 million pounds to 5 million pounds but setting an auction record for the artist. It was also the top-selling lot in the sale.

ENERGY, ENVIRONMENT, SCIENCE AND HEALTH

Will ‘Water Rings’ Quench Beijing’s Thirst?-Caixin The city of Beijing has floated a plan for a 230 kilometer network of waterways that improves the urban ecosystem and helps quench the thirst of the capital’s 20 million people. The city government introduced the plan in April, saying six to eight years would be needed to build the proposed “ring roads of water.” Officials did not say when work might begin.

Tibetan Environmental Activist Drowns in Attempt to Save Endangered Fish-RFA A Tibetan environmental activist and writer of children’s books has died while trying to gather evidence of illegal fishing in a protected lake in northwestern China’s Qinghai province, according to sources in the region and in exile. Kawa Nyingchak, who had tried with other Tibetans to block the killing of endangered fish, drowned in Qinghai Lake on June 26 while attempting to haul in nets used by Chinese poachers so that he could hand them in to police, a Tibetan living in the area told RFA’s Tibetan Service.

China-India: Revisiting the ‘Water Wars’ Narrative | The Diplomat , as far as managing the Brahmaputra River is concerned, playing up a “water war” or China threat narrative is not helpful; worse, the real danger of such a narrative – as with other China threat theories – is that it becomes a self-fulfilling prophecy, as it erodes the mutual trust that is desperately needed to improve Sino-Indian relations and encourages overreaction from both sides.-Zhang Hongzhou is an Associate Research Fellow with the China Programme at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University, Singapore.

U.S., China, and Brazil Make Climate Pledges Ahead of Paris Summit | Foreign Policy China on Tuesday formally presented its plans to curb greenhouse gas emissions by 2030 in preparation for the big United Nations climate summit in Paris later this year. If met, the targets, coming from the world’s largest source of greenhouse gases, would seem to give the planet a fighting chance to avert the worst impacts of climate change later in this century.

EDUCATION

Tsinghua, PKU Get into Social Media Spat over Student Recruiting-Caixin Provincial admissions offices of top two universities got into a social media spat over the recruiting of top students – complete with charges that the colleges pay top students to choose them – an exchange that one education expert said is indicative of China’s overemphasis on test results. The war of words between the admissions offices of Peking University and Tsinghua University in the southwestern province of Sichuan erupted as recent high school graduates are getting the results of the “gaokao” university entrance exams they took early in June.

BOOKS AND LITERATURE

Paper Republic We at Paper Republic are a collective of literary translators, promoting new Chinese fiction in translation. Our new initiative, Read Paper Republic, is for readers who wonder what new Chinese fiction in English translation has to offer and would like to dip a toe in the water. Between 18th June 2015 and 16th June 2016, we are publishing a complete free-to-view short story (or essay or poem) by a contemporary Chinese writer, one per week for a year, 52 in total.

New Youth and Old Nightmares – Words Without Borders 2015 has been a good year so far when it comes to contemporary Chinese literature in translation, thanks to the publication of English-language editions of novels by two of China’s most important contemporary writers: Yan Lianke and Yu Hua

BEIJING

China Aims to Move Beijing Government Out of City’s Crowded Core – The New York Times It is also a sign of the determination of China’s leader, President Xi Jinping, to forge a new urban blueprint for China. Over the past year and a half, officials have been slowly unveiling an ambitious plan to create a new urban cluster of 130 million people that would be the size of Kansas or Belarus. Called Jing-Jin-Ji, it is named after the three areas it encompasses: Jing for Beijing, Jin for the nearby port city of Tianjin, and Ji for the traditional name for the province of Hebei, which surrounds both cities.